National Pension System (NPS)

What is the National Pension System?

National Pension System (NPS) is a voluntary, market-linked retirement savings scheme regulated by the Pension Fund Regulatory and Development Authority (PFRDA) under the Ministry of Finance. NPS started on 1 January 2004 for central government recruits and was opened to all citizens from 1 May 2009.

According to the NPS Trust, NPS is "a market-linked voluntary contribution scheme that helps you save for your retirement". You contribute during your working years into a Permanent Retirement Account Number (PRAN); the money is invested by PFRDA-registered pension funds; and at exit you take part of the corpus as a lump sum and convert the rest into a lifetime annuity.

Key objectives

• Provide old-age income security to every Indian citizen, not only organised sector employees.
• Build retirement corpus at low cost; NPS is among the cheapest managed retirement products available in India.
• Give subscribers a portable account that follows them across jobs, employers and states.

Main features

• Two account types: Tier I (retirement, locked) and Tier II (savings, liquid).
• Entry age 18 to 70 years.
• Choice of pension fund manager and of asset allocation; Active Choice or life-cycle Auto Choice.
• Fully portable across employers and locations, with one PRAN for life.
• Regulated by PFRDA; assets held by the NPS Trust, separate from the fund managers.

Who is eligible for the National Pension System?

You can apply if:

• You are an Indian citizen aged 18 to 70 years on the date of application.
• You complete KYC with the Point of Presence you register through.
• You are a resident Indian or a Non-Resident Indian. NRIs can open NPS accounts on a repatriable or non-repatriable basis.

You cannot apply if:

• You are under 18 or over 70 years of age.
• You are an Overseas Citizen of India (OCI) or a Person of Indian Origin without Indian citizenship.
• You are applying as a Hindu Undivided Family or any other non-individual entity: NPS accounts are individual only.
• You are an undischarged insolvent or have been declared of unsound mind.
• You already hold an NPS account. Only one NPS account per person is permitted; a second registration will be rejected against your PAN or Aadhaar.

What is the difference between NPS Tier I and Tier II?

This distinction confuses more subscribers than any other part of NPS, so it is worth setting out precisely.

Put simply: Tier I is the pension; Tier II is a low-cost mutual-fund-like wrapper you can dip into freely. Tier II subsequent contributions are made in multiples of Rs 250. When a Tier I account is closed, the linked Tier II account closes automatically and the balance is transferred to the registered bank account.

What documents are required for NPS?

How to apply for NPS online

1. Open the eNPS portal linked from npstrust.org.in and select Registration → Individual Subscriber.
2. Choose your KYC route: Aadhaar-based OTP verification, PAN with bank KYC, or DigiLocker, and pick your Point of Presence bank if using the PAN route.
3. Select Tier I only, or Tier I and Tier II together. Tier II cannot be opened without Tier I.
4. Enter personal details, employment details, and nominee details with percentage allocation.
5. Choose your pension fund manager and your investment approach, Active Choice, where you set equity, corporate bond, government security and alternative asset weights yourself, or Auto Choice, where allocation shifts automatically with age.
6. Upload your photograph and signature, then verify the details on the preview screen.
7. Make the initial contribution. A minimum of Rs 500 for Tier I and Rs 1,000 for Tier II; through net banking, UPI or debit card.
8. Complete eSign with Aadhaar OTP or print and courier the physical form to the CRA within the stated window.
9. Note down the PRAN generated on completion. This number stays with you for life across employers and states.

How to apply for NPS offline

1. Visit any Point of Presence — Service Provider (PoP-SP) branch. Most banks, and several non-bank financial companies, are registered PoPs.
2. Fill in the Common Subscriber Registration Form (CSRF) and attach KYC documents, a photograph and a cancelled cheque.
3. Hand over the initial contribution of at least Rs 500 for Tier I.
4. Collect the acknowledgement and wait for the PRAN kit containing your PRAN card and login credentials.

How much do I need to contribute to NPS?

NPS Tier I requires Rs 500 to open and a minimum of Rs 1,000 in each financial year to keep the account active. There is no upper limit on how much you can contribute.

If Tier I contributions fall below Rs 1,000 in a year, the account is frozen. Reactivation requires paying the minimum contribution plus the prescribed penalty through your Point of Presence or the eNPS portal. The invested corpus is not forfeited, the account simply stops accepting new transactions until unfrozen.

Tier II requires Rs 1,000 to open, after which contributions are in multiples of Rs 250, with no annual minimum so long as Tier I stays active.

What are the NPS exit and withdrawal rules?

PFRDA notified the PFRDA (Exits and Withdrawals under the National Pension System) (Amendment) Regulations, 2025 in the Official Gazette on 12 December 2025, substantially loosening the old rules. Because the change is recent, confirm the applicable position with your Point of Presence before acting.

Normal exit at or after 60 to non-government subscribers

• Corpus of Rs 8 lakh or less: 100% may be taken as a lump sum.
• Corpus between Rs 8 lakh and Rs 12 lakh: up to Rs 6 lakh as an immediate lump sum, with the balance taken through Systematic Unit Redemption over at least six years, or used to buy an annuity, or a mix.
• Corpus above Rs 12 lakh: up to 80% as lump sum, with a minimum of 20% into an annuity, down from the earlier 40% annuity floor.

Normal exit: government subscribers continue under the earlier structure: up to 60% lump sum with at least 40% annuitised.

Deferment. Subscribers can now defer the lump sum withdrawal or the annuity purchase up to age 85, raised from 75.

Partial withdrawal. Withdrawals are permitted from your own contributions for specified purposes; children's higher education or marriage, purchase or construction of a residential house, and treatment of specified critical illnesses. Under the 2025 amendment, up to four partial withdrawals are allowed before age 60, and once every three years after 60 if the account is continued.

Loan against corpus. The amendment permits, for the first time, a loan from a regulated financial institution against the pledged NPS corpus, capped at 25% of the subscriber's own contributions.

Tier II has no lock-in and no purpose restriction. You can redeem units at any time.

What tax benefits does NPS offer?

NPS Tier I contributions qualify for deductions under Section 80CCD of the Income Tax Act, 1961:

• Section 80CCD(1), your own contribution, within the overall Section 80C ceiling of Rs 1.5 lakh.
• Section 80CCD(1B), an additional Rs 50,000 deduction exclusive to NPS, over and above the Rs 1.5 lakh limit.
• Section 80CCD(2), the employer's contribution, deductible in addition to the above limits and available under the new tax regime as well.

Tier II gives no deduction to ordinary subscribers, and gains are taxed according to the applicable rules on redemption. A separate lock-in Tier II product exists for central government employees, which is not available to general subscribers.

Since the 80CCD(1B) benefit sits under the old tax regime, subscribers who have moved to the new regime should confirm their position with a tax adviser before contributing purely for the deduction.

Where to get help with NPS

• PFRDA: 1800 110 069
• Protean CRA subscriber helpdesk: 1800 889 1030
• NPS Trust website: npstrust.org.in; scheme returns, fund manager performance and the current charge structure
• Your Point of Presence branch, for KYC updates, nominee changes, reactivating a frozen account and exit processing

NPS charges are disclosed publicly on the NPS Trust website. Nobody should charge you a fee to "get your NPS approved", registration through eNPS is a self-service process.